U.S. holiday retail sales are expected to increase 4.5% year-on-year during the final two months of 2026, marking the strongest pace of growth since 2021, according to research from Visa’s Business and Economics Insights. The forecast points to continued consumer resilience despite elevated prices, while also highlighting differences in how households are allocating holiday budgets across goods, experiences and travel.

Consumer Spending Shows Continued Resilience

Visa’s research indicates that income growth and household wealth continue to provide an important foundation for consumer spending. Although inflation remains a factor in purchasing decisions, consumers appear prepared to maintain relatively strong holiday spending levels as the year approaches its final shopping period.

Michael Brown, principal U.S. economist at Visa, said income growth remains an important foundation for spending, while higher prices continue to influence where consumers direct their holiday budgets. The combination suggests that the strength of household finances remains an important counterweight to persistent inflationary pressure.

The outlook also aligns with recent performance from major payment networks. Visa and Mastercard both exceeded earnings expectations for the quarter ended September 30, underscoring continued resilience in consumer spending and payment activity.

Holiday Budgets Rise Despite Higher Prices

Consumers are expected to spend an average of $777 on holiday gifts this year, compared with $736 in 2025. That represents an increase of 5.6%, indicating that households are planning larger nominal budgets even as they continue to adapt to higher prices.

However, stronger spending does not necessarily mean consumers are ignoring inflation. The research suggests that shoppers remain selective about where their money goes, with price levels influencing the composition of holiday purchases. This could support retailers that provide products aligned with household priorities while creating greater pressure on discretionary categories where consumers have more flexibility to reduce spending.

Goods Continue to Outpace Experiences

Spending preferences also point to a continued emphasis on traditional holiday purchases. More than half of surveyed consumers expressed a preference for travel and events, but only 15% said they would prioritize buying experiences, compared with 27% planning to purchase physical gifts.

The gap highlights a distinction between what consumers would like to spend on and where their actual holiday budgets are likely to be directed. Physical gifts may remain a more prominent component of holiday spending even as consumers express interest in experiences, potentially reflecting the practical constraints created by elevated prices.

Income Differences Shape the Holiday Outlook

The spending outlook is not uniform across households. According to the research, only households earning more than $200,000 increased holiday airfare spending, while lower-income groups reduced their bookings.

This divergence highlights the uneven impact of higher prices and suggests that aggregate consumer resilience can mask significant differences in household behavior. Higher-income consumers may have greater flexibility to maintain discretionary spending, while lower-income households remain more sensitive to price increases and may prioritize essential or traditional purchases.

Looking ahead, the holiday season will provide an important test of the strength and breadth of U.S. consumer demand. Investors will be watching retail sales, payment volumes and spending patterns across income groups to determine whether income growth can continue offsetting inflation. The results could also provide broader signals about the health of the U.S. economy as 2026 draws to a close.